Norwegian Cruise Line seeks $1.4B to weather coronavirus shutdown
Capital raise is 'going to be very helpful'
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Norwegian Cruise Line Holdings is hoping to raise $1.4 billion of new capital through a combination of debt, equity, and an investment from a private-equity firm.
Norwegian, the smallest of the big three U.S. cruise operators, suspended its operations in mid-March due to the coronavirus pandemic along with its peers -- Carnival and Royal Caribbean Cruises.
There has been some disagreement about how much cash Norwegian is burning each month as its ships sit idle during the pandemic crisis. But several analysts estimated recently that Norwegian had six to eight months of liquidity remaining with no sailings.
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Norwegian on Tuesday said it has begun a public offering of $350 million of ordinary shares and is proposing to sell $650 million in exchangeable senior notes due 2024 in a private offering.
The company's capital raise includes a $400 million investment in exchangeable senior notes due in 2026 to an affiliate of L Catterton, a private-equity firm.
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"The cruise industry has been very resilient over a long period of time, driven by strong secular tailwinds and a high level of guest satisfaction," Scott Dahnke, co-CEO of L Catterton, said in a press release.
It remains to be seen, however, just how quickly sailings resume and how quickly customers come back given all the negative press the industry has suffered due to cruise ships that have been stranded with coronavirus-afflicted passengers and crew members.
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Norwegian's stock was at $12 and change on Tuesday morning, down some 15% in early trading.
The Centers for Disease Control and Prevention last month extended its No Sail Order until July 24. Carnival announced Monday that it planned to resume North American sailings on a limited basis starting Aug. 1.
Last month, Carnival disclosed that it had raised about $6.4 billion of capital, mostly debt.
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Norwegian's release announcing the private-equity investment outlined the risks the company faces. Those include "our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our liquidity requirements that are sufficient to eliminate the substantial doubt about our ability to continue as a going concern."
One longtime industry observer called that language "boilerplate material which obviously sticks out in times like these."
The latest capital raise "is going to be very helpful," this person said.